From PortlandAfoot

TriMet's payroll tax is a tax levied on all for-profit companies in TriMet's service area. It typically accounts for about 55 percent of TriMet's operating budget. Counting self-employment tax and state "in lieu" payments, the tax is projected to bring the agency $213 million in fiscal year 2011, 25 percent of the agency's total budget.

Contents 1 Rate 1.1 Future increases 1.1.1 Increase planned for 2014 2 Exemptions for some employers 3 Projected growth 4 Set-asides for new or restored service 4.1 Self-defined commitment by TriMet 4.2 Revenue growing faster than new service 5 Merits as a funding source 5.1 Advantages 5.2 Disadvantages

[edit] Rate

As of 2012, the payroll tax rate was $0.007018 per dollar, meaning that affected employers must pay TriMet 0.7018 percent of each worker's gross payroll for services performed inside the service area.

[edit] Future increases

Without further action, the tax rate is expected to rise $.0001 per dollar on Jan. 1 of each year through Jan. 1, 2014, when the rate will reach $0.007218 per dollar, or 0.7218 percent of gross payroll.

In 2009, the Oregon legislature's S.B. 34 gave the TriMet board of directors the authority to raise its payroll tax by another tenth of a percentage point over 10 years, to a total of $0.008218 per dollar, with increases of no more than $0.0002, or 0.2 percentage points, per year.

Under the bill, the hike would require TriMet's board to make "a finding that the economy in the district has recovered to an extent sufficient to warrant the increase in tax. In making the finding, the board shall consider regional employment and income growth."

[edit] Increase planned for 2014

In its final environmental impact statement for the Portland-Milwaukie light rail project, TriMet wrote that it intends "to implement the additional payroll tax authority in Senate Bill 34 on January 1, 2015, increasing the rate an additional one-one hundredth of a percent for ten years. This would result in a payroll tax rate of 0.8218 percent beginning January 1, 2024."

[edit] Exemptions for some employers

Institutions that are exempt from TriMet's payroll tax include:

• The federal government.
• Public school districts.
• Tax-exempt 501(c)3 organizations, except hospitals.
• Foreign insurers.
• Insurance adjusters, agents and agencies and office support staff, except their non-insurance income.
• Companies providing services outside the transit district.

Tips, "casual labor," domestic services in private homes, "seamen who are exempt from garnishment," and seasonal farm laborers are also exempt.

[edit] Projected growth

In October 2010, TriMet projected 3 percent growth in TriMet's payroll tax for fiscal year 2011, 4.4 percent in fiscal year 2012, 4.9 percent in fiscal year 2013, and 4.5 percent per year thereafter.

[edit] Set-asides for new or restored service

[edit] Self-defined commitment by TriMet

As of 2010, TriMet spends revenue that was newly created by the 2003 and 2009 payroll tax hikes only on new or restored service, according to TriMet CFO Beth deHamel.

This practice, which TriMet describes as a "commitment," is not written into law. It dates from TriMet's promises to the Oregon legislature. As a result, TriMet has defined "new service" itself, interpreting the phrase to include:

• WES, streetcar or MAX operations and construction, including debt payments.
• LIFT costs that exceed inflation since 2005.
• Reducing bus and rail headways or improving reliability, including restoration of reduced service.
• Bus replacement debt service.
• Planning for the Columbia River Crossing project to Vancouver.

TriMet has issued bonds against this money to pay for the Green Line and plans to do the same with the planned Orange Line.

[edit] Revenue growing faster than new service

TriMet expects its new revenue from payroll tax to grow faster than its spending on "new service" (as defined by the agency) between 2012 and 2016.

If "new service" were defined only as improved frequency or system expansion, rather than including debt payments, LIFT cost increases and other expenses, payroll tax growth would further outpace service growth.

The riders' group OPAL has argued that this money should be saved to restore or improve the frequency of existing bus or MAX lines instead, or to reduce fares. Anti-tax groups such as the Cascade Policy Institute have argued that TriMet should not raise payroll taxes at all.

In 2011, state Rep. Katie Eyre Brewer (R-Hillsboro) introduced a bill that would forbid transit agencies from raising payroll taxes without having increased frequency or system expansion in the previous year. The bill attracted several Republican co-sponsors but died for lack of committee support.

[edit] Merits as a funding source

[edit] Advantages

TriMet officials often credit the payroll tax for the stability and growth of Portland's public transit service since TriMet was formed in 1969. Unlike property tax, it grows with population, inflation and real wages. It is also broader and more stable than sales or gas tax.

The tax also falls directly on businesses, who benefit from a larger supply of available workers, less need for auto parking and lower commuting costs for workers who use the TriMet system.

[edit] Disadvantages

Payroll tax is more volatile than property tax, declining sharply during recessions. Its effects are also largely hidden from voters, because the tax is paid only by employers. The payroll tax slightly increases an employer's cost to create a job in the TriMet service area.

More than sales or property tax, payroll taxes are also sensitive to demographic changes in the workforce. The projected aging of Portland's population may slow the growth of TriMet's payroll tax over the next few decades.

One other disadvantage is that it is collected at the point of employment; allegedly giving high-employment areas (such as downtown and Washington County) a disproportionate influence in TriMet's affairs--such areas can credibly threaten to withdraw from TriMet. A jurisdiction which did exactly that is the city of Wilsonville, which in 1988 withdrew from TriMet to form SMART. Wilsonville alleges that TriMet provided poor service to Wilsonville (which was very sparsely populated in the 1980s, and had more workers than residents)--diverting money which ought to benefit Wilsonville in order to provide service elsewhere. However, critics of SMART note that many of the employees on whose behalf payroll taxes are paid live outside of Wilsonville, and that instead of providing these employees with quality transit connections, they are instead being forced to subsidize free transit for Wilsonville residents (while SMART charges a fare for its connecting lines, the intra-city lines are fareless). Other suburban communities, which do not have a high ratio of jobs to residents, cannot credibly threaten to withdraw from TriMet (and in the current accounting, may in fact be "subsidized" by Portland residents, as many suburban lines do not attract significant ridership).